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G.R. No.

101976 January 29, 1993


THE COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
THE COMMISSION ON AUDIT, respondent.
G.R. No. 102258 January 29, 1993
TIRSO B. SAVELLANO, petitioner,
vs.
THE COMMISSION ON AUDIT, respondent.
Law Firm of Armando A. Armovit for petitioner in G.R. No. 102258.

NARVASA, C.J., J.:

The issues joined in these consolidated petitions focus, as it were, on the general audit jurisdiction of the Commission of
Audit vis-a-vis the Bureau of Internal Revenue's power to determine entitlement to the tax informer's reward under Section
316 1 of the National Internal Revenue Code.

On June 25, 1986, petitioner Tirso B. Savellano furnished the Bureau of Internal Revenue (BIR) with a confidential affidavit of
information 2 denouncing the National Coal Authority (NCA) and the Philippine National Oil Company (PNOC) for non-payment
of taxes totalling P234 Million on interest earnings of their respective money placements with the Philippine National Bank
(PNB) since October 15, 1984 to said date. Investigation by the BIR confirmed the reported tax liabilities, and upon demands
thereafter made, NCA and PNOC paid to the BIR the following amounts of taxes corresponding to the period October 15, 1984
to August 31, 1986:

NCA Schedule of Payments

Confirmation Receipt No. Date of Payment Amount Paid

B6402543 9-10-86 P 1,067,682.86


B7373646 10-15-86 14,918,482.19
——————
Total P15,986,165.05

PNOC Schedule of Payments

Confirmation Receipt No Date of Payment Amount Paid

B6402542 9-10-86 P 2,952,349.23


B12581298 6-30-87 31,003,129.89
B12581904 7-31-87 30,000,000.00
B12601251 10-01-87 30,000,000.00
— ——————
Total P93,955,479.12

By a letter dated November 28, 1986, then BIR Commissioner Bienvenido Tan, Jr. recommended to the Minister of Finance
payment to petitioner Savellano of an informer's reward equivalent to 15% of the amount of P15,986,165.00 paid by NCA, or
P2,397,924.75. 3 Said recommendation having been favorably passed upon by the Committee on Rewards of the Department
of Finance, the same was approved by then Deputy Minister of Finance Alfredo Pio de Roda, Jr.; 4 and Savellano was in due
time paid the aforesaid amount.

The records do not show when the informer's reward in the PNOC case was recommended for payment; only that it was
approved by then Finance Undersecretary Marcelo Fernando. 5 Petitioner Savellano was paid his informer's reward in the
PNOC case in the total amount of P14,093,321.89 in four (4) installments, the last of them on December 1, 1987. 6

On February 8, 1989, respondent Commission on Audit (COA) rendered COA Decision No. 740 7disallowing in audit the payment
of informer's reward to petitioner Savellano in the NCA case on the ground that payment of an informer's reward under
Section 281 of the National Internal Revenue Code is conditioned upon the actual recovery or collection of revenues, and no
such revenue or income was actually realized or recovered on any benefit accrued to the government, since two (2)
government agencies were involved. The income realized by the BIR out of the withholding taxes paid by the NCA was a
reduction of the income of the latter, resulting in a zero effect in revenues realized or recovered. Respondent COA also
impugned the propriety of the claim for informer's reward based on inter-governmental violations. In its view, allowance of
claims of the kind would not only place a premium upon violations committed by government agencies but also induce
collusion among government offices in order to obtain the informer's reward. It reasoned that if the State cannot be held
responsible for the tortious acts of its employees unless the latter acted as special agents, with more reason it should not be
held liable to pay informer's reward upon violations committed by government agencies. 8

Petitioner Commissioner of Internal Revenue sought reconsideration of COA Decision No. 740. He was followed by petitioner
Tirso Savellano and Mrs. Potenciana Evangelista, former Chief of the BIR Accounting Division after the COA Resident Auditor
issued Revised Certificate of Settlement and Balances (CSB) No. 89-0001-104(c) dated July 20, 1989, 9 directing the
withholding of salaries or any amount due them and to the following BIR officials/employees/persons who were being held
personally liable for the disallowed amount of P11,397,924.75: 10

Atty. Jaime Maza, Chief, Legal Division


Mrs. Potenciana Evangelista, Chief, Rev. Acctg. Division
Mr. Jesus Parado, Chief, Personnel & Adm. Office
Atty. Vicente Y. Puno, Asst. Commissioner, Personnel & Adm.
Mr. Marcelo N. Fernando, Undersecretary of Finance
Mr. Eufracio Santos, Deputy Commissioner, BIR
Mr. Jose A. Resurreccion, Asst. Commissioner, Administrative
Ms. Marilyn Soledad, Researcher, Legal Division
Atty. Alicia P. Clemeno, Chief, Law Division
Mr. Melchor S. Ramos, Chief, Financial & Mgt.
Mrs. Elena C. Pineda, Special Disbursing Officer.

These pleas were denied due course in COA Decision No. 1930, 11 denying due course to the requests for reconsideration.
Hence, these separate petitions, which were ordered consolidated in the Court's Resolution dated March 10, 1992 in G.R. No.
102258. 12

In seeking nullification of COA Decisions Nos. 740 and 1930 in G.R. No. 101976, petitioner Commissioner of Internal Revenue
argues that: the approval by the Department of Finance of the claim for informer's reward of petitioner Savellano is
conclusive upon the executive agencies concerned, respondent COA included, as it constitutes the final determination of the
proper administrative authority under Section 90 of the Government Auditing Code of the Philippines; there were actual cash
collections of P109,941,644.17 from NCA and PNOC for non-payment of withholding taxes on interest earnings, which amount
had accrued to the General Fund; Section 316 (now 281) of the National Internal Revenue Code (NIRC) entitling an informer
to a reward for information leading to the collection of internal revenue taxes is clear and needs no interpretation; and
assuming that it does, it should be interpreted in favor of the informer; NCA and PNOC have separate personalities from the
Bureau of Internal Revenue as well as the Government and the State; and superior and subordinate officers of the
government are not civilly liable for acts done in the performance of their official duties.

For his part, petitioner Tirso Savellano questions the COA disallowance on the ground that the express statutory grant to BIR
of the power to allow or disallow claims for payment of tax informer's reward is an implied statutory denial of the same
power to the COA, which would otherwise transform said respondent into "a super tax authority" and "undermine and dilute
the substance and efficacy of the very entity created and empowered by law to collect taxes and augment the government's
revenue collecting potentials" 13 He further maintains that there was "actual" collection of tax by the BIR from the NCA and
PNOC because while said agencies are government-owned corporations, they derive their income from the exercise of
corporate/proprietary/private functions, which does not, in and by itself, constitute public funds. It is only when such
income is taxed that whatever part thereof corresponds to the amount of the tax becomes part of the national treasury,
thereby redounding to the benefit of the government.

Required to comment on the petition in G.R. No. 101976, and later, on the petition in G. R. No. 102258, the Solicitor General
begged off on the ground that "its position is different from the stand taken by respondent Commission on Audit (COA) in the
present case" and sought to be excused from further representing respondent COA, in whose behalf he prayed for a
reasonable period of time to file its own comment. 14 In its Resolution of January 16, 1992 in G.R. No. 101976, this Court
noted the Solicitor General's manifestation, excused him from further representing respondent COA in the case and required
the latter to file its own comment within ten (10) days from notice. 15 In G.R. No. 102258, however, the Court denied a
similar plea. It required the Solicitor General to explain within ten (10) days from notice why his position was different from
COA's, and gave said respondent a period of ten (10) days to file its comment on the petition, if it so desired. 16

Briefly put, the Solicitor General's explanation is that he found COA's disallowance of the informer's reward erroneous
because: government corporations are subject to tax under the NIRC; having personalities distinct from the government, if
they evade payment of their taxes, the amounts corresponding to such liabilities could be utilized for purposes exclusive to
them; contrarily, if they do pay their taxes, the amounts so paid accrue to the General Fund; Section 281 of the NIRC does
not make any distinction among taxpayers from whom taxes are eventually recovered; it simply prescribes that for an
informer to be entitled to the reward, the information he furnishes should result in the recovery of revenues; statutes
offering reward must be liberally construed in favor of informers; the possibility of collusion is not sufficient basis for
disallowance, since collusion cannot be assumed, while the official acts of the BIR and the Department of Finance are
entitled to a presumption of regularity; even if the taxpayers referred to by an informer are private entities, the possibility
of collusion still remains; such a consideration, moreover, goes into the wisdom of the law a matter that concerns the
legislature and not the courts, much less, COA; and there being no evidence of any irregularity, the determination made by
the BIR should be binding upon COA pursuant to the Government Auditing Code.

Respondent COA questions the personality of petitioner Commissioner of Internal Revenue to bring the instant suit, arguing
that the Commissioner is not an aggrieved party adversely affected by the assailed decisions. In justification of its actions,
COA invokes its constitutionally-vested audit jurisdiction over all government agencies, to which, it contends, the statutorily
granted power of the Secretary of Finance under Section 90, P.D. 1445 must yield. It insists that petitioner Savellano is not
entitled to the informer's reward because there was no actual collection of revenues under the benefit-to-the-government
rule; and Savellano's alleged information did not lead to the discovery of a fraud. It characterizes the payment of informer's
reward as irregular, being predicated upon violations committed by government agencies, and would have the persons named
in CSB No. 89-0001-104 (c) held liable for participation in illegal or irregular disbursements of public funds by reason of their
respective duties.

The Commissioner of Internal Revenue, in assailing respondent COA's authority to disallow the payment of informer's reward,
relies heavily on Section 90 of P.D. No. 1445, otherwise known as the "Government Auditing Code of the Philippines." A
reading of said provision, which is quoted hereunder, shows that such reliance is misplaced:

Sec. 90. Payment of rewards. — When a reward becomes payable by authority of law for information given
relative to any offense or for any act done in connection with the apprehension of the offender, the reward
shall, in the absence of special provisions, be paid in such manner as shall be prescribed by executive order.
The final determination by the proper administrative authority pursuant to law or any such order, as to
whether or not the persons concerned are entitled to any reward and the amount thereof, shall be
conclusive upon the executive agencies concerned as regards the liability of the government.

The final determination by the Department of Finance, through the recommendation of the BIR, of petitioner Savellano's
entitlement to the informer's reward is, under Section 90, conclusive only upon the executive agencies concerned.
Respondent COA is not an executive agency. It is one of the three (3) independent constitutional commissions. 17 Specifically,
it is the constitutional agency vested with the "power, authority and duty to examine, audit and settle all accounts pertaining
to the revenue and receipts of, and expenditures or uses of funds and property owned or held in trust by . . . the
government, or any of its subdivisions, agencies or instrumentalities. . . ." 18 To ensure the effective discharge of its
functions, it has been empowered, subject to the limitations imposed by Article IX (D) of the 1987 Constitution, to define the
scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and
auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive,
extravagant or unconscionable expenditures or uses of government funds and properties. 19

The final determination made by the Finance Department cannot bind respondent COA or foreclose its review thereof in the
exercise of its constitutional function and duty to ensure that public funds are expended and used in conformity with law. To
hold otherwise would be to ignore the clear mandate and the equally clear implications of Section 3, Article IX (D)of the 1987
Constitution providing that:

No law shall be passed exempting any entity of the government of its subsidiary in any guise whatever, or
any investment of public funds, from the jurisdiction of the Commission on Audit.

The exercise by respondent COA of its general audit power is among the constitutional mechanisms that give life to the
check-and-balance system inherent in a republican form of government such as ours. Taken in this light, such exercise cannot
be regarded as an unlawful or unwarranted invasion of, or interference with, the authority and power of the executive
agency concerned to determine whether or not a person is entitled to a reward provided by law and the amount thereof. As
held in Dingcong vs. Guingona, Jr., et al:

Constitutional Law; Administrative Law; Power and authority of COA. — Not only is the Commission on Audit
(COA) vested with the power and authority, but it is also charged with the duty, to examine, audit and settle
all accounts pertaining to . . . the expenditures or uses of funds . . . owned by, or pertaining to, the
Government or any of its subdivisions, agencies, or instrumentalities (Article IX [D], Section 2[1], 1987
Constitution). That authority extends to the accounts of all persons respecting funds or properties received
or held by them in an accountable capacity (Section 26, P.D. No. 1445). In, the exercise of its jurisdiction, it
determines whether or not the fiscal responsibility that rests directly with the head of the government
agency has been properly and effectively discharged (Section 25[l], ibid.), and whether or not there has
been loss or wastage of government resources. It is also empowered to review and evaluate contracts
(Section 18[4], ibid.). And, after an audit has been made, its auditors issue a certificate of settlement to
each officer whose account has been audited and settled in whole or in part, stating the balances found due
thereon and certified, and the charges or differences arising from the settlement by reason of
disallowances, charges or suspensions (Section 82, ibid.).

This is not to say, however, that the disallowance in audit by respondent COA is in itself final. The same may be set aside and
nullified by this Court, if done with grave abuse of discretion.

The informer's reward granted to petitioner Savellano is based on Section 316 (now 281) of the National Internal Revenue
Code. 20 It reads:

Sec. 281. Informers reward to persons instrumental in the discovery of violation of the National Internal
Revenue Code and in the discovery and seizure of smuggled goods.

(1) For violation of the National Internal Revenue Code. Any person except an internal revenue official or
employee, or other public official, or his relative within the sixth grade of consanguinity, who voluntarily
gives definite and sworn information, not yet in the possession of the Bureau of Internal Revenue, leading to
the discovery of frauds upon internal revenue laws or violation of any of the provisions thereof, thereby
resulting in the recovery of revenues, surcharges and fees and/or the conviction of the guilty party and/or
imposition of any fine or penalty, shall be rewarded in the sum equivalent to fifteen per centum of the
revenues, surcharges or fees recovered and/or fine or penalty imposed and collected. The same amount of
reward shall also be given to an informer where the offender has offered to compromise the violation of law
committed by him and his offer has been accepted by the Commissioner and in such a case, the fifteen per
centum reward fixed herein shall be based on the amount agreed upon in the compromise and collected
from the offender; Provided, That should no revenues, surcharges or fees be actually recovered or collected,
such person shall not be entitled to a reward: Provided, further, That the information mentioned herein
shall not refer to a case already pending or previously investigated or examined by the Commissioner or any
of his deputies, agents or examiners, or the Secretary of Finance or any of his deputies or agents: Provided,
finally, That the reward provided herein shall be paid under the regulations issued by the Commissioner of
Internal Revenue with the approval of the Secretary of Finance.

One of the reasons for respondent COA's disallowance of the informer's reward under consideration is that there was actually
no revenue realized or recovered as two (2) government agencies were involved. This view is simplistic and merits no
concurrence. It overlooks the fact that the two (2) government agencies involved, NCA and PNOC, possess legal personalities
separate and distinct from the Philippine government. Although both are government-owned and controlled corporations,
NCA and PNOC perform proprietary functions. Their revenues do not automatically devolve to the general coffers of the
government. Unless transferred to the Philippine government through the vehicle of taxation, no part of their revenues is
available for appropriation by the Legislature for expenditure in government projects; such revenues remain said agencies' in
their entirety, to be applied to and expended for their own exclusive purpose. Clearly, then, when said revenues are
subjected to tax, the portion thereof corresponding to such tax becomes, in its own, revenue for the government accruing to
the General Fund.

That the informer's reward was sought and given in relation to tax delinquencies of government agencies provides no reason
for disallowance. The law on the matter makes no distinction whatsoever between delinquent taxpayers in this regard,
whether private persons or corporations, or public or quasi-public agencies, it being sufficient for its operation that the
person or entity concerned is subject to, and violated, revenue laws, and the informer's report thereof resulted in the
recovery of revenues. It is elementary that where the law does not distinguish, none must be made. Ubi lex non distinguit
nec nos distinguere debemos. 21

The Solicitor General correctly dismisses the mere possibility of collusion to obtain the informer's reward as sufficient ground
for disallowance. Collusion cannot be presumed. It must be proved by clear and convincing evidence. In the case at bar,
there is no showing of collusion between petitioner Savellano as informer and any official or employee of the BIR or the
Department of Finance. Neither is there any evidence to overcome the presumption of regularity 22 enjoyed by the official
acts of the BIR and the Department of Finance in approving the claim of petitioner Savellano for informer's reward.

Respondent COA considers the payment of informer's reward in this case as placing a premium upon violations committed by
government agencies and therefore, improper. At first blush, it would appear that by paying the informer's reward, the
government punishes itself for violations committed by its own agencies. This, however, is more apparent than real. The
delinquencies of these agencies are not condoned, much less rewarded. It is the person whose information led to the
discovery of their transgressions who is being rewarded. Although this results in a reduction in the amount of revenues
actually received, the net effect is that the government still gains from the remaining amount paid, which otherwise would
have been lost to it.
WHEREFORE, the consolidated petitions are hereby GRANTED. The assailed decisions of respondent Commission on Audit are
set aside. No pronouncement as to costs.

SO ORDERED.

Gutierrez, Jr., Cruz, Feliciano, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo and Campos, Jr.,
JJ., concur.